There are different steps that one needs to follow to open a bank account or start investing in a mutual fund. One of these steps includes declaring whether or not you are a politically exposed person (PEP).
As financial organisations, banks and other financial institutions are subject to Anti-Money Laundering regulations. To control money laundering cases, banks carry out PEP screening as a part of the customer’s onboarding process. It is a part of the KYC process which helps banks to understand their customers better.
The policy will vary among financial institutions. While one bank may not open bank accounts for PEP, other banks may put an extra level of surveillance.
But, how will you know if you are PEP?
According to the definition, PEP is a person who is authorised to perform prominent public functions in a country and include governors of the state, members of Parliament, military officers, senior government and judicial executives and heads of local bodies such as municipal corporations, among others.
Moreover, you could also qualify as a PEP if you are a family member or a close relative of such an individual. Individuals holding senior positions in political parties without any official position are considered as PEP.
The bank regulator RBI had also told banks to verify the identity of the person and seek information about the source of the fund before accepting them as a customer. Also, banks were told to closely monitor such bank accounts and family members or close relatives.
While banks can create bank account for regular individuals within minutes, the decision to open a bank account for a PEP is to be taken at a senior level.
If you fall in the PEP category, the KYC and customer due diligence process could take a longer time to process as you may have to give further documents etc. Few banks may not consider PEP requests. However, if you are a PEP and all your transactions are legitimate, there is not much to worry.
If you fall in the PEP category, the KYC and customer due diligence process could take a longer time to process as you may have to give further documents etc. Few banks may not consider PEP requests. However, if you are a PEP and all your transactions are legitimate, there is not much to worry.
To summarise, according to Financial Action Task Force (FATF), you are a PEP if:
